How dire is Michael Jackson's financial situation? Last year he was forced to put up a $2 million diamond watch in order to borrow money from a bank.

This revelation comes at a crucial time in Jackson's roller-coaster career. It's already been acknowledged that he's used the Beatles song catalog to borrow $200 million from Sony Music. At the same time, Jackson is struggling with poor sales of his latest album, Invincible, and Internet rumors that Sony is ignoring the album in order to force Jackson's hand in turning over the catalog.

This column reported several weeks ago that Jackson was in constant touch with Richard Rowe, head of Sony Music Publishing, who wants to negotiate a settlement on the loan and take possession of the Beatles catalog. Sony issued a strangely worded denial at the time, saying it did not seek "to buy" ATV Music Publishing from Jackson. But, as a Sony business insider confirmed for me, "foreclose" would have been the appropriate word since Sony technically already owns the songs.

Now the news that Jackson, who lives on borrowed money, needed to pawn a diamond watch.

Strange but true: On June 14, 2001 — three days after Jackson played the finished version of Invincible for Sony executives — he borrowed money from Bank of America. In a financing statement filed with the state of California, Michael used for collateral a "King Kalla" watch made by the tony house of Vacheron Constantine. The watch is valued at roughly $1.9 million.

The very same watch was the basis of a lawsuit filed against Jackson 11 months earlier by Beverly Hills jeweler David Orgell. Jackson, Orgell claimed, had taken the watch home with him on approval. When Jackson did not return the watch or calls from Orgell, the jeweler sued him for $1.45 million, plus $15,000 for other items Jackson hadn't returned.

Jackson then did return the watch, but in court papers Orgell claimed the watch was a mess.

"The watch, when it was returned, had lotion on it," Orgell spokesman Ali Soltani said in a TV interview at the time. "The watch was scratched ... had food particles intertwined. This is a gem of a watch, and it was obviously used."

On June 13, 2001, Craig Marcus, attorney for Orgell, filed a notice with the court that the case had been settled.

The next day Jackson — evidently in possession of the watch — used it as collateral for a loan from the Bank of America. The implication is that Jackson did not have the money for the watch, and immediately needed to replace the money he had to pay Orgell.

Call it the largest pawnshop deal on record. Presumably the watch is sitting in a vault somewhere, ticking away.

Marcus did not return calls. Calls for this story to Jackson's manager, Trudy Green, and his attorney, John Branca, were not returned either.

Jacko's Banker: 'I Kept Him Alive'

Jackson's penchant for borrowing money does not stop there. On June 26, 2001, he filed another Uniform Commercial Code (UCC) Financing Statement. This time, possibly because his credit was tapped out at conventional banks, he took a loan from an outfit called Royalty Advance Funding of Beverly Hills, Calif. (From their Web site: "There is no minimum or maximum amount that can be advanced. Any songwriter, publisher, composer, or producer is welcome to take advantage of our music royalty/residual advancement service. No questions asked.")

The collateral was his music catalog, which contains hit songs such as "Billie Jean" and "Beat It," as well as songs Jackson purchased some time ago written by Sly Stone including classics such as "Everyday People," "Family Affair" and others.

Parviz Omidvar, the owner of Royalty Advance Funding, told me: "He doesn't blow the money. He doesn't misuse the money. He's not a very big spender. If you had the same kind of money he has, you'd have the same Neverland. He makes a ton of money, that's why he has to pay his taxes. For him, he's in a different category than you and I."

Jackson has used that same catalog, as well as the Beatles catalog, consistently over the last 10 years to raise cash to support his bizarre lifestyle. Some of his expenses (besides staggering legal and accounting fees) include maintenance of a zoo on the Neverland estate; a staff of 120 people; and at least one multimillion-dollar settlement to the family of a boy who claimed Jackson molested him.

The financing statement about the watch turned up in a stack of other filings — all under the UCC — that show the King of Pop in constant need of cash. Throughout the 1990s Jackson used his Neverland Valley Ranch near Santa Barbara, Calif., and his own song catalogs to borrow millions of dollars.

These loans, mostly from Bank of America and NationsBank, as well as Sony Music, were separate from loans he took using the Beatles song catalog as collateral. Those loans, still outstanding, are said to be in the $200 million range.

Although it's not unusual for wealthy people to use their assets as collateral, it is unusual for them to put up jewelry.

One banker, a senior vice president at the Bank of America who has worked closely on Jackson's accounts, told me yesterday: "I've kept him alive for 20 years. And it's not that the advice he gets is bad. It's him. He's his own worst enemy."

N.Y. Real Estate Broker Jacko's New Pal

But right now Jackson is depending on the advice of James Meiskin, owner of Plymouth Partners, a New York commercial real estate broker. Meiskin, who was formerly married to Jerry Seinfeld's sister-in-law Rebecca Sklar and is a dead ringer for the comedian, met Jackson in November 2000 at the home of public relations guru Howard Rubenstein when Jackson was introducing his new charity with Rabbi Shmuley Boteach. I know this because I met him there. Meiskin subsequently joined the board of the charity.

When I called him last week to ask about his involvement with Jackson, Meiskin rudely told me he knew nothing about the charity or anything about Jackson. When I mentioned that he had introduced himself to me at Jackson and Boteach's Carnegie Hall charity fundraiser in 2001 — and that the money from the event had never gone to charity — Meiskin said, "I don't know what that is." And hung up.

But sources tell me that Meiskin has approached money people in New York, asking for names of people he might introduce Jackson to as a way of raising cash.

The pattern of Jackson's borrowing may be cause for alarm — and reason to think he's been getting if not bad advice over the years, then he is not as smart as he was once portrayed.

Jackson borrowed money using Neverland as collateral in late 1997. When that loan terminated, he again used his famous ranch to raise cash in October 1999. According to statistics on file in California, Neverland occupies a little over 2,500 acres. It's assessed at $12 million with another $9 million in listed improvements. But a local realtor in Los Olivos told me the property could be worth as much as $30 million by now "if the right buyer came along."

The total land value of Neverland is assessed at about $2 million.

Jackson's banker said of the Neverland loans: "DO you have a mortgage? Well, that's his mortgage."

Jacko Borrows Against Everything He Owns

But it's the song catalogs that keep Jackson going. They seem to be his only currency.

In August 1994 — five months after Time magazine reported Jackson had paid a multimillion-dollar settlement after a 14-year-old boy claimed he had molested him — the King of Pop signed loan papers with Sony Music in which he used his catalog of songs to secure a loan.

But apparently that loan didn't solve Michael's problems. In 1995, Jackson used the same catalog to borrow money from NationsBank (now Bank of America). In a separate filing with NationsBank that year, he also put up the Beatles catalog. In 1996 he again put up the MIJAC songs — including "We Are the World," the proceeds of which were supposed to go to charity.

In 1997, Neverland was used as collateral with NationsBank, while Michael borrowed money from Sony using proceeds from his deal with a Saudi prince who promised to build theme parks with him. He also borrowed money from Sony in 1997 against the MIJAC catalog. What was happening was obvious — a shell game in which Jackson kept using his copyrights as assets against which he was constantly securing cash. As one deal expired, a new one would take its place.

In October 1999, a day after Jackson took out a new loan on Neverland, for example, he borrowed more money from Bank of America using his song catalogs. The former application was made in Jackson's name; the latter was done under "MJ Publishing Trust."

Bank of America and Royalty Funding are not Jackson's only sources for getting loans. Sony Music has also been there for Jackson. A check of UCC's filed by Sony in California show that this sort of dealing is unusual for the music company. The only other artist's name that turns up with regularity is Luther Vandross.

According to filings, Jackson also borrowed money from Sony Music on Sept. 22, 1997, in a separate filing. In that loan, he used any money due him from a deal he'd made with Saudi Prince Alwaleed Bin Talal to start a number of business ventures. None of those businesses — including theme parks and restaurants, TV programming and films — panned out.

"You realize that by taking the loans from Sony, Michael was getting advances without having to pay taxes," says one source knowledgeable about Jackson's affairs. "Eventually, when the loans are called, taxes will have to be paid."

The same could be said of Jackson's outstanding loan from Sony concerning the Beatles. However, a Sony insider told me recently that the company is not interested in recouping the principal of the $200 million loan. "They just want the interest and the Beatles songs," he said.

But now rumors have surfaced — in what seems to be an organized Internet campaign — that Sony purposely backed away from Jackson's Invincible album when the singer refused to renegotiate his loan. This very column wrote something similar several months ago.

I said then that it was odd that Sony had refused to release any commercial singles from Invincible, and also refused to release Jackson's planned charity single, "What More Can I Give?" Even though Invincible wasn't the greatest album in the world, it had potential hits in "Cry" and "Butterflies." In neither case did the record company make an effort to promote them. For all intents and purposes, Invincible, with domestic sales of around 2 million copies, is now dead.